Palm Oil – The Green Development Oil Newsletter – Issue 10, December 2010

Cargill Rejects Greenpeace Pressure – Unilever Suspension Looks Suspect
International food producer Cargill will continue to purchase palm oil from PT Smart, despite attempts by Greenpeace to manufacture claims to pressure companies into dropping the Indonesian-based supplier.  Unilever’s suspension of trade with PT Smart on the basis of Greenpeace complaints now looks commercially suspect.

World Bank Further Delays Palm Oil Review; Final Decision Remains with Bank Management
The World Bank has been forced to extend the timeframe for consideration of the palm oil strategy, following criticism over the intrusion of environmental standards at the expense of poverty reduction.  The new timeframe will see the strategy submitted to World Bank Management in March 2011 – a delay of at least three months. Yet, still no sign the Bank’s Board of Directors will have final say.

Indonesian REDD+ Framework – Palm Oil Not an Underlying Cause of Deforestation
The Indonesian National Development Planning Agency (BAPPENAS) and UN-REDD Indonesia have collaborated to produce a draft national REDD+ strategy.  The strategy identifies the underlying drivers of deforestation Indonesia – which notably does not include oil palm plantations.

IFAD Continues Investment in Palm Oil in Uganda
The International Fund for Agricultural Development (IFAD) is continuing its investment in Ugandan palm oil, with the loan agreement for the Vegetable Oil Development Project Phase 2 being signed recently in Rome.

NGOs Caught Manufacturing ‘Evidence’ Against Leading Provider of Sustainable Palm Oil
A report by the Danish Energy Agency and an investigation by clients of the palm oil company, United Plantations, has cleared the company against claims from anti-palm oil NGOs.

Brazilian Sugar Industry warns EU that the Renewable Directive May Conflict with WTO
In its submission to the EU review of how the impacts of indirect land use change could be incorporated into the Renewable Energy Directive, the Brazilian Sugar industry has warned that if the EU cannot establish a scientific basis for measuring indirect land use change, the Directive will conflict with WTO obligations

Cargill Rejects Greenpeace Pressure – Unilever Suspension Looks Suspect

International food producer Cargill will continue to purchase palm oil from PT Smart, despite attempts by Greenpeace to manufacture claims to pressure companies into dropping the Indonesian-based supplier.  Unilever’s suspension of trade with PT Smart on the basis of Greenpeace complaints now looks commercially suspect.

The Greenpeace allegations were that PT Smart had cleared Orang-utan habitat and primary forest;  engaged in extensive forestry on peat land; and had failed to comply with RSPO rules on assessment of sensitive areas before developing them.

The Rainforest Action Network claimed the audit report made clear “Greenpeace’s evidence against PT Smart was justified.”  Not really.

The independent audit found no evidence of clearing of Orang-utan habitat or primary forest by PT Smart.  It did find PT Smart failed to assess sensitive areas in one fifth of new areas opened in 2007, but fully met that commitment in the following three years.  It did find PT Smart was operating in deep Peat areas, but the infraction was minor. It occurred on only 1.4 percent of PT Smart plantation land and derived from planting as part of the Indonesian government’s transmigration programs to move landless people to more sparsely populated areas.

The RSPO’s grievance panel has now accepted a plan for PT Smart to rectify those areas identified by the independent audit as breaching RSPO guidelines.  This includes restoring peat land where plantations were established on deep peat.

Cargill has accordingly stated that they were “encouraged” that PT Smart had identified areas of non-compliance with RSPO and were acting to remedy them.

The practical and commercially realistic approach of Cargill contrasts with that of Unilever’s suspension of trade with PT Smart following Greenpeace’s wild allegations.

The assessment commissioned by Unilever of the Greenpeace allegations found the Greenpeace maps of PT Smart concessions were wrong (the same finding was made of Greenpeace’s similar unwarranted claims of environmental damage by Indonesian paper maker APP), yet concluded the “risk” Unilever took in suspending trade with PT Smart was warranted because of its relationship to APP.

Shareholders would be right to wonder about that judgement in light of the audit commissioned by Cargill and its capacity to manage the issue without suspending supply.

World Bank Further Delays Palm Oil Review; Final Decision Remains with Bank Management

The World Bank has been forced to extend the timeframe for consideration of the palm oil strategy, following criticism over the intrusion of environmental standards at the expense of poverty reduction.  The new timeframe will see the strategy submitted to World Bank Management in March 2011 – a delay of at least three months. Yet, still no sign the Bank’s Board of Director’s will have final say.

Consultations on the strategy will now continue until the end of this month.

The revised strategy will be made public 30 days before it is presented to Bank Management for consideration.

The World Bank’s unwavering intention to have the strategy decided on by Bank Management – rather than national representatives – indicates the extent of damage this policy is likely to do to developing nations.

Given that palm oil is one of the most successful crops at reducing poverty due to its high yield, the World Bank is risking sacrificing their central mandate of poverty alleviation to environmental causes.

The World Bank’s position also indicates a disturbing move in the Bank away from agricultural led economic growth – which is widely recognised by development economists as the most stable and long-term basis for economic growth.

This continuing change of emphasis in Bank policy is now being questioned in the US Congress.  Reassertion of Republican control of the House foreshadows further trouble for the Bank over this.

Indonesian REDD+ Framework – Palm Oil Not an Underlying Cause of Deforestation

The Indonesian National Development Planning Agency (BAPPENAS) and UN-REDD Indonesia have collaborated to produce a draft national REDD+ strategy.  The strategy identifies the underlying drivers of deforestation Indonesia – which notably does not include oil palm plantations.

The draft national REDD+ strategy has been formulated to assist in the application of REDD+ schemes and payments in Indonesia.

The draft strategy identified a number of underlying drivers which led to deforestation and forest degradation in Indonesia.  The drivers identified – poor spatial planning, tenurial problems, ineffective forest management, and weak legal basis and law enforcement – were those conditions which create the environment for deforestation.

The draft national strategy also identifies macro-level causes of deforestation, including increasing demand for pulp, paper and palm oil.  However it also recognises that it is the underlying conditions, such as poverty, poor land tenure and poor planning which lead to deforestation – not the end product.

The Indonesian national strategy is a clear rejection of the superficial conclusion that an end consumer product can be the ‘cause’ of deforestation.

The draft strategy also makes it clear that Indonesia will ensure that local food supply is assured and socio-economic factors, including the limited avenues available to smallholders to develop productive economic activities, are considered in the development of a REDD+ project.

This approach is a far more responsible and productive approach than the extremist position of environmental NGOs which routinely put at risk the livelihoods of hundreds of thousands of people who rely on palm oil as a source of income.

IFAD Continues Investment in Palm Oil in Uganda

The International Fund for Agricultural Development (IFAD) is continuing its investment in Ugandan palm oil, with the loan agreement for the Vegetable Oil Development Project Phase 2 being signed recently in Rome.

The $52 million loan will seek to increase the amount of oilseed produced by small holders and expand oil palm plantations into the Mukono District.

The first phase of the Project delivered a doubling in the per capita consumption of oil and fats in the rural Ugandan diet, to about 30% of the annual minimum requirement.

Phase 2 is expected to deliver a doubling of per capita consumption to almost 60% of the annual minimum requirement by 2018, with Ugandans consuming vegetable oil from crops produced locally.

The Vegetable Oil Development Project is partly funded through a grant from The Netherlands Development Organisation and is expected to benefit directly some 3,000 smallholders from oil palm development and 136,000 households will benefit from oilseed development.

The Vegetable Oil Development Project is the largest private partnership being managed by IFAD.  IFAD has stated that that this largely because oil palm is a highly sustainable, energy-efficient crop and is eight to ten times more productive than any other annual oil crop and palm oil processing produces fewer carbon emissions than other sources of oilseeds that require annual planting.

The World Bank should take note.

NGOs Caught Manufacturing ‘Evidence’ Against Leading Provider of Sustainable Palm Oil

A report by the Danish Energy Agency and an investigation by clients of the palm oil company, United Plantations, has cleared the company against claims from anti-palm oil NGOs.

In the latest attempt to smear the palm oil industry, anti-palm oil NGOs accused United Plantations of abusing pesticides, including paraquat, which harmed plantation workers.

An investigation by United Plantations customers, AAK and Arla, revealed that the working conditions at United Plantations were acceptable, that “there is safety equipment that is intact and no holes, and that employees are trained to use it properly…[t]he employees who were observed at the plantation, [have] used the equipment properly.”

The experts undertaking the report stated that they “cannot find evidence of the allegations” made by anti-palm oil NGOs.

Following the report by AAK and Arla, the Danish Energy Agency also undertook an investigation into the allegations.  The investigation found that United Plantations was “a successful and sustainable business with favorable working conditions.”  Furthermore, United Plantations, a leading member of the RSPO had undertaken to phase out the use of paraquat in 2008.  No response yet from the Greens who trumped up this evidence.

Brazilian Sugar Industry Warns EU that the Renewable Directive May Conflict with WTO

In its submission to the EU review of how the impacts of indirect land use change (ILUC) could be incorporated into the Renew able Energy Directive, the Brazilian Sugar industry has warned that if the EU cannot establish a scientific basis for measuring indirect land use change, the Directive will conflict with WTO obligations.

Following the recent stakeholders’ consultation organized by the European Commission to address the issue of indirect land use change (ILUC), the Brazilian Sugarcane Industry Association (UNICA) called on the Commission to review modeling work and ensure scientific robustness to calculate ILUC.

UNICA observed that developing the science to calculate and understand ILUC has become crucial. “The role and limits of current models do not give a sound overview of the level of ILUC that can be attributed specifically to biofuels,” stated Emmanuel Desplechin, Chief Representative in the European Union for UNICA. “While giving a positive verdict on some energy crops, such as Brazilian sugarcane ethanol, the studies that have been commissioned in Europe so far have been conducted without much input from international experts and have led to incomplete reports.”

According to UNICA, discrepancies in recent results show that science cannot accurately measure the magnitude of the ILUC phenomenon due to biofuels expansion. “Any public policy based on such highly debatable results would be easily challengeable at the World Trade Organization,” stated Desplechin.

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